Stark Enterprises produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value-added standard (SQ) for this activity is zero. On July 1, at the beginning of the fiscal year, 4 setup hours were allowed and used per batch. The standard wage rate for setup labor is $30.50 per setup hour. During the first quarter of the new fiscal year, the company is planning to implement a new setup method developed by Starks industrial engineers that is expected to reduce setup time by 20 percent. The new procedure was implemented during the first quarter and the improvement expected was realized.

Part A

What is the setup standard for setup hours and the associated expected cost at the beginning of the first quarter? What is the Kaizen standard and expected associated cost?

Part B

What is the setup standard for setup hours and the associated cost at the end of the first quarter?

Part C In your own words, explain how Kaizen Standards can be applied to a business. What role do these standards play and how can a company go about achieving these Kaizen Standards. Provide an example of a company that could benefit from using Kaizen Standards. Do not use any wording or examples from the book!